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CFP Missed Concepts > Retirement > Flashcards

Retirement Flashcards

(80 cards)

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1
Q

Name the 2 defined benefit pension plans

A

Defined benefit pension plan
Cash balance pension plan

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2
Q

Name the 2 defined contribution pension plans

A

Money purchase pension plan
Target benefit pension plan

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3
Q

Name the 7 profit sharing plan (defined contribution profits sharing plan)

A

Profit sharing plan
Stock bonus plan
Employee stock owed ship plan
401(k)
Thrift Plans
New comparability plans
Age-based profits sharing plans

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4
Q

In service withdrawals are permitted in this plan, what is it

A

Profit sharing
After 2 years of plan allows

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5
Q

In service withdrawals are not allowed under this plan, what is it

A

Pension plan, allele after 59 a a half

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6
Q

Plan provides a joint survivor annuity, what plan is it

A

Pension plan

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7
Q

This plan is not subejrct to mandatory funding

A

Profit sharing

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8
Q

Defined contribution
The plan has the legal rompas to pay:

A

Deferral of compensation and taxation

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9
Q

This plan does not allow for the assets to be invested more than10 % of employer securities

A

Pension plan

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10
Q

How much and a profits sharing plan invest in the employees securities

A

Up to %100

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11
Q

This plan provides past credit to employee for plan

A

Defined benefit

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12
Q

Defined contribution annual Contribution limit is

A

25% of total employee compensation

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13
Q

The annual Contribution of defined benefit plan is

A

Not less than promised amount to be paid ( calculated by actuaries)

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14
Q

Which plan has PBGC insurance

A

defined benefit

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15
Q

The paper the standard eligibility rules to be part of a qualified plan

A

Be age 21 and have 1 year of full time work (1000 hours)

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16
Q

What do part timers have to do to qualify for a qualified plan

A

Have had 3 years consecutively and be 21. MIT have accumulated after 1/1/21
Part time work (500 hours)

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17
Q

What is the special eligibility election that employers can take to extend the wait time for an employee to be part of a plan

A

Extend time to 2 years and be 21 of age. But vesting is immediately

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18
Q

What are the types of vesting schedules for defined contribution plans

A

2-6 graduated and 3 year cliff. If expanding eligibility to 2 years the vesting is immediate once The individual reaches 2 years

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19
Q

What type of vesting is a available for defined benefit plans

A

3-7 year graduated and 5 year cliff
And 2 year eligibility is immediate vesting on second year

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20
Q

What are top heavy plans

A

When more than 60% of benefit is for key employees

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21
Q

What are the requirements of funding for Non key employees when a plan is top heavy

A

Defined benefit : at least 2% x years of service x compensation factor
Defined contribution: 3% minimum match

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22
Q

What is the maximum covered compensation an employer can do under defined benefit plan and defined contribution plan

A

$305k

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23
Q

What is

A
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24
Q

What are the tests to determine is life insurance can be bought in a defined benefit plan

A

25 % test and the 100-1 Ratio test

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25
What are the 2 tests thy the 25 % test covers for life insurance to pass in a defined benefit plan
If using term or universal policy, there is a limit up to 25% of the employers contribution for the participants to cover premiums If using whole polish it is up to 50%
26
What does the 100-to-1 ratio test consist of for life insurance to be passed on a defined benefit plan
Employer can insure coverage up to the limit by finding it: (Monthly retirement benefit x 100)
27
What defined contribution plans use little to no actually services
Target benefit and money purchase plans because they usually have separate accounts for participants where participants can find their own
28
What is PBGC
Insurance to cover defined benefit plans in case the account is not funded to pay up benefit
29
What are the PBGC limits
6,204 monthly benefit or 74,454 yearly benefit
30
What is social security integration
Provides extra benefit for those who have excess compensation of social security wage base
31
What method can be used by both defined benefit and contribution to calcaste the social security integration
Excess method by taking the excess covered compensation and multiplying it by .75% and multiplying that by years of service up to 35 years
32
What’s are they 3 formulas for defined benefit plans
Flat amount formula Flat perfect age formula Unit credit formula
33
What are cash balance plans
Individuals see their hypothetical individual accounts
34
What does the cash balance formula consists of
Pay credit and interest credit Pay credit is a combination of years of service and salary or integrated with social security Interest credit is a hypothetical return on investment that the employers ensures it will be invested at
35
What are characteristics of money purchase plans
Provides a fixed % of employees compensation Benefits younger participants Does not guarantee retirement benefit
36
What are characteristics of target benefit plans
They use formula based on age and compensation to give each participants Benefits older participants Participants chooses investments
37
What is the latest a profit planning can be established and funded
As Kate as the federal income due date plus extension Sole proprietor is Oct 15 and Entities is Sept 15
38
What is permitted disparity in profits sharing plans
Social security integration- Allows excess contributions to higher compensated employees above social security wage base up to max limit of $305,000 of covered compensation
39
What method can the profit sharing plan use for social security integration l?
Excess method Generally higher (5.7%) than the base rate
40
What is CODA
Allows employees contributions to qualified plan
41
What is the vesting on profit sharing plans
2-6 graduate or 3 year cliff
42
What are the distributions rules on profit sharing plans
Only upon termination, death, disability or retirement . May permits in service withdrawals after 2 years
43
What is CODA
Cash or deferred arrangement/ 401(k) Cabe be Attached to profit sharing plans and stock bonus plans Allows employee to do contributions to qualified plans
44
What entities are allowed to have a CODA
Corporations, partnerships, propietership, LLC, tax - exempted
45
How long must an employee quiet to be part of a CODA plan?
No more that one year
46
What is the vesting of employees and employer contributions
Employees are 100% vested already Employers are either 3 year cliff or 2-6 graduates
47
Employees contributions are limited to what $ amount
$20,500 Catch. Up of $6,500 for 50 and older
48
The employee limitations are also subject to what other kinds of non qualified plans
403(b), 457 and SARSEP
49
What are thrift plans
Allows to make additional contribution from the employee side over the limitation of $20,500 after taxes and after the ADP test
50
So Roth 401(k) requiere RMD
Yes
51
What is the employee contribution limitation for Roth 401k
20,500 plus catch up contribution of 6,500 if 50 and older
52
Can you do a traditional ORA. Conversation to a Roth 401k
No, only to Roth IRA
53
Are there income limitation to a Roth 401k
No, as long as it’s earned income
54
What are the income limitations for a Roth IRA
MFJ- 204k - 214k MFS - 0 - 10k S - 129k - 144k Of modified AGI / AGI
55
What are the limitations of the employer contributions
Still 25% of covered compensation I’m total both employee and and employers deferrals can’t go over of $61,000. Or 67,500 of 50 and older Employees contributions do not affect the 25% limit on employer’s contribution
56
What is the DP test
A discriminatory test to make sure HC are not being favored Over NHC
57
According to the ADP schedule of the ADP for NHC employees is 1% - 2% then
The permissible ADP for HCE is 2 times the ADP for No employees
58
According to the ADP schedule of the ADP for NHC employees is 2% - 8% then
The permissible ADP for HC is 2% plus ADP for NHC
59
According to the ADP schedule of the ADP for NHC employees is 8% or over then
The Permissible sabble ADP for HC is 1.25 times ADP of NHC
60
Plan sponsors can choose data from last year to conduct ADP test or this year. Why could using current year be better
It allows for HC to be compensated more and there is more ways to fix any failures of passing
61
What can an employee do if it fails the ADP test
Corrective contribution Recharacterization Qualified non elective contribution Qualified matching contribution
62
What does a corrective distribution entail when trying to pass the ADP test
Return funds to employees plus any earnings on excess of limit of HC employees Must be done after by 2 month and a half of plan year end or 10% penalty on excess
63
What does the recharaterization entail when trying to pass the ADP test
Changing pre tax contributions for after tax Must be done by 2 and a half after the plea year ends or 10% penalty on excess
64
What does qualifies non elective contribution mean when trying to pass the ADP test
Contribute to all eligible NHC employees to increase their ADP Contributions are 100% vested since they will seem to be coming from employee
65
What entails the qualified matching contribution when trying to pass the ADP test
Additional Matching contributions are given to NHC employees who already did a deferral contribution
66
What is the ACP test
The actual contribution percentage
67
What is a safe harbor 401k plan
Offer a non-elective contribution of at least 4% for all employees However to comply employer can do 1. 3% non elective contribution at 100% vested or 2. Match 100% up to 3 % employee deferral and 50% of any additional deferral up to 5 %
68
What is a negative election
When employees can choose to opt out of doing deferrals. Automatically they are enrolled in deferrals
69
Loans in 401(k) and 403(b) are permitted if the amount
Is half of the vested plan benefit up to 50k If the plan benefit is less or equal to 20k, amount allows is 10k o the greater vested amount
70
How long can lain be repaid for x number of years
5 years through payroll deductions
71
What are allowable reason to take a distribution from a 401(k)
Retirement, death, separation of service and attainment age 55, attainment age 59 1/2, termination of plan and no other plan is established, certain hardships
72
What type of contribution are Included in hardship distributions
Employee deferral contributions and qualified non elective co tribute on and qualified matching contribution may also be included
73
Name the exceptions to avoid 10% early penalty for Qualified Plans (10)
Death, disability, substantial periodic payments, medical expenses in excess of 7.5 of agi, QDRO, qualified public safety employee who separate of services and is 50 years, attainment of 55 and separation of service, to pay tax levy, dividend paid within 90 days of plan year end from ESOP
74
Name the exceptions to avoid 10% early penalty for IRA (8)
Fort home, heath insurance, death, disability, higher education, medical expenses, equal periodic payments, reach of age 59 1/2
75
What is NUA?
Net unrealized appreciation
76
How do you calculate NUA
FMV At date of distribution sale of stock - value of stock at date of employer stock contribution= NUA
77
How is ESAPS established
Established as trusts
78
Can ESOPS sellers defer gains if they sell the stock and how
Yes, by reinvesting in qualifies securities within 12 months
79
What type of employer can establish ESOPS
S corp and C corp
80
What is a Keogh plan?
A qualified plan for a self-employed person

CFP Missed Concepts (6 decks)

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